Robert Uberman, Multinational Corporations (MNCs) 2.

Robert Uberman, Multinational Corporations (MNCs)

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MNCs ownership structures – typical MNCs ownership structures – typical patterns patterns

• Widely held – no dominant shareholder or group of shareholders

• Ultimately held – controlled by a dominant shareholder or a group of shareholders :– family or a private person– State– widely held financial institution– widely held MNCSource: La Porta, ..., „Corporate Ownership Around the World”, NBER, Cambridge,

MA, June 1998


Ownership structures: USA and GermanyOwnership structures: USA and Germany

B ill G a tes2 3 ,7 %

P res id en t

P au l A llen9 %

C o-fu n d er

S teve B a llm er5 %C E O

M ic roso ft C orp .

2 5 % sh a re s in M u n ich R e2 2 ,5 % sha re s in D re sdn e r B a nk

5 % sh a res in D e u tsch e B a nk2 2 ,5 % sh a res in B H u n dW

M u n ich Re2 5 %

R e -in su ra n ce

1 0 % sh are s inM u n ich Re

D re sd n e r B a nk1 0 %

U n iversa l ba n k ing

D e u tsch e B a nk1 0 %

U n iversa l ba n k ing

B a yern isch e H yp ho te ke n un d W e chse ln B a nk1 0 %

U n iversa l ba n k ing(n o w U n ic re d ito Ita lian o G ro u p)

A llia n z A G H o ld ingIn su ra n ce


Ownership structures: Ownership structures: JapanJapan

S aku ra B an k5 %

M itsu i F & M In s2 ,5 %

M itsu i M . L ife In s .2 ,2 %

M itsu i T . & B .2 ,4 %

M itsu i G rou p1 2 ,1 %

S an w a B an k5 %

N ip p on L ife In s .3 ,7 %

S an w a G rou p8 ,7 %

Toka i G rou p5 %

Toyo ta G rou p4 ,8 %

Toyo ta M oto r C orp .


Ownership structure in various countriesOwnership structure in various countries

Source: Aves, ..., „Who Owns the Largest Firms Around the World?”, International Research Journal of Finance and Economics, Issue 21 (2008)


Ownership structure in Ownership structure in EUEU

Źródło: Report to EU Commission, ..., „Who Owns the European Economy?”, INSEAD, 2013, p. 4

Robert Uberman, Korporacje międzynarodowe

Threat of underestimating historyThreat of underestimating history

• „The farther backward you can look (..) the farther forward you are likely to see” according to Winston Churchill

• Ian Morris, „Why The West Rules - For Now”, str. 13


Evolution of ownership structures of Evolution of ownership structures of American MNCsAmerican MNCs

• American system of transparent financial markets and „shareholders’ democracy” has been strongly enrooted in the US history, it was created by:

• Reluctance towards any form of a forced centralisation (eg. restricting banking activities to one state , Glass-Steagall act banning ownership of corporate shares by banks, therefore effectively separeting „commercial” and „investment” banks)

• Long years of peace and prosperity allowing for capital accumulation by families (the last war fought on the US soil ended in 1865)

• Financial strength of the US corporations• Ron Chernow, „The Death of the Banker”, str. 71 and subs.


Evolution of ownership structures of Evolution of ownership structures of GermanGerman MNCs MNCs

• In formative years of modern economy German political culture was conservative with authoritarian tendencies

• Subsequent crises: lost of foreign assets during the WW I, hiperinflation in 1923 and Great Depression 1929-33 forced many companies to convert debts into shares – effectively leading to takeovers by financing banks

• Most of Jewish assets were directly or indirectly despoiled by German banks and never returned during Hitler times

• Ron Chernow, „The Death of the Banker”, str. 53 and subs.


Recent evolution of German and Japanese Recent evolution of German and Japanese ownership structures and relation to ownership structures and relation to finafinanncial marketscial markets

• Global financial markets have started to influence MNCs behaviour (in 1995 r. Jurgen Schrempf, newly elected Daimler-Benz CEO, calling to the 20 top managers discovered that only two of them had any idea

what was an actual quotation of the company’s shares !!!) • Departure of many owners – founders of a

string of enterprises created in 50s and 60s• But:• „[..] for all the dismantling of the cross-shareholdings at the

heart of Deutschland AG, a system of interlocking directorships still exists” (FT, April 5, 2007, p. 17).


US shareholding – descent of US shareholding – descent of individual/family owners and ascent of individual/family owners and ascent of investment funds investment funds

Source: FT, July, 23, 2007

Evolution of ownership structures Evolution of ownership structures – – development of networksdevelopment of networks

Vitali, …, „The network of global corporate control”, str. 4


Evolution of ownership structures Evolution of ownership structures – – growing concentration in intermediatesgrowing concentration in intermediates

Vitali, …, „The network of global corporate control”, str. 4



Evolution of US MNCs ownership structure – Evolution of US MNCs ownership structure – uniformityuniformity

• Vernon Smith (Noble Prize winner, 2002): increase use of financial instruments by shareholders forces down their interests in operational results of MNCs leading to weaken their control over Boards.

(Authers J.,”A formula to survive unknown”, Long-Term Investment, FT, Nov., 29, 2007, str. 9)

• A correlation between each individual stock of the S&P 500 and the index itself constantly growths over a long period and reached 86 % in October 2012.

• Investors lose interest in individual companies and look at the market as whole.

(Authers J.,”No end soon to markets’ herd - like moves”, Long-Term Investment, FT, Feb, 13, 2012, str. 24)

Robert Uberman, Korporacje międzynarodowe

Old (western continental Europe) – Old (western continental Europe) – Governmental influence over MNCsGovernmental influence over MNCs

• Old continental western Europe has created a complex and multidimensional system enabling governments official to exhort considerable power over MNCs whish is increasingly less based on outright shareholding and more on complex instruments.

• „Even if there had been no golden share, for a French company to proceed (with a Total and Elf merger) without a green light from the French government would have been career destroying for the management involved”.Yergin Daniel: „The Quest. Energy, Security and The Remaking of the Modern World” , The Penguin Press, New York, 2012, pp. 100.


France – an example a governmental France – an example a governmental involvement into MNCs’ ownership involvement into MNCs’ ownership structurestructure

• N. Sarkozy has set up in 2009 r. a new state owned investment fund named Fonds Strategique d’Investissement (FSI) with 2 bln. EUR in equity to act as a, supposedly, minority shareholder in new businesses.

• However the real goal of the Fund’s creation was to promote French industry champions, either private or state owned

• This Fund has effectively taken over a troubled car parts maker: Valeo „Dirigisme de rigeur”, The Economist, 2nd of January, 2010, pp. 45-46.

• Italy plans to follow the French suit, effectively reversing is former policy which peaked up in 2002 with dissolution of the IRI „Italy plans state investment fund to repel invaders”, The Wall Street Journal, April 4, 2011, p. 4.


MNCs – goals MNCs – goals

• Enterprises, which in turn become MNCs, are usually funded by profit-seeking investors.

• MNCs activities are influenced by various stakeholders (eg. governments, employees) and have to consider their interests but rather as limits not as goals

• Therefore it is a value increase which drives and should drive ultimately MNCs’ behavior (Rappaport, str. 1 –13)


Is the Corporate SociaIs the Corporate Sociall responsibility to responsibility to make money? – distribution of opinions make money? – distribution of opinions amongst managers from various countriesamongst managers from various countries

„Milton Friedman goes on tour”, The Economist, 29th of January, 2011, pp. 57.


MNCs goals – shareholders and MNCs goals – shareholders and stakeholdersstakeholders

GoalsGoals

LimitsLimits

Robert Uberman, Multinational Corporations (MNCs) 2.

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